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China's Economic Growth Benefits the World
2004/05/22

  

       ----Guo Shuqing, deputy governor of the People's Bank of China and director of the State Administration of Foreign Exchange, told the press that the sustained and rapid economic growth Of China, a developing country with a huge population, is conducive to the economic development of its neighbors and the worm at large.


       China has witnessed sustained and rapid economic growth and a good situation in the balance of international payments and foreign exchange earnings, in spite of global economic recession. Some overseas personages worry that the increasing share taken by China's exports in the international market may blunt the competitive edge of other countries' exports, thereby adversely affecting their economic growth. Some people even claim that China is exporting deflation to the world through dumping huge amounts of low-priced commodities in the international market. Guo Shuqing, deputy governor of the People's Bank of China and director of the State Administration of Foreign Exchange, retorted that China's exports take up only a small proportion of developed countries' GDP. Moreover, processing trade exports make up more than a half of China's total exports. Chinese enterprises, mainly taking processing fees from this kind of exports, have no power to set prices for final products, and therefore can hardly affect the price levels of importers. Guo noted that viewed from various aspects, the sustained and rapid economic growth of China, a developing country with a huge population, is conducive to the economic development of its neighbors and the world at large.
   
       First, China's labor cost is low. The low price of China's export commodities can enhance the real income level of the people of importing countries, stimulate the growth of consumption in other fields and propel the economic growth of these countries.
   
       Second, the import of large quantities of primary and light industrial products from China is conducive to the industrial restructuring and economic progress of developed countries, as the two can take advantage of each other's economic strength.
   
       Third, China's economic development has enhanced the country's demand for imports, which has expanded the exports of other countries. Last year, China's imports from ASEAN, Japan, Russia and Australia increased by 34 percent, 25 percent, 6 percent and 8 percent respectively over the amount in the previous year. This resulted in China's trade deficits of US$7.63 billion, US$5.03 billion, US$4.89 billion and US$1.26 billion with respective countries. In the first two months of this year, China's foreign trade exports and imports increased by 32.8 percent and 57.1 percent respectively, leaving a trade deficit of US$560 million. In the first two months, China's imports from the United States, Japan, the ROK, EU and ASEAN rose by 37.8 percent, 58.4 percent, 75 percent, 43 percent and 71.9 percent respectively over the amount in the same period of last year. Following China's economic development and the growth of the Chinese people's purchasing power, the world will gain increasing benefits from the swiftly growing Chinese market. Take Southeast Asian countries for example. The fluctuation on their export market used to greatly exceed that on the global market. In recent years, however, along with the growth of their exports to China, the fluctuation on their export market has been reduced considerably.
   
       Fourth, the surplus in the current account may bring along the outflow of a certain amount of capital, which will increase China's investment in other countries' assets.      Fifth, China's economic development has provided overseas businesses with broader prospects for investment in the country. Profits remitted abroad by foreign investors have increased continuously in recent years, with the amount rising from US$17 billion in 1995 to US$27.7 billion in 2001.

       On the exchange rate of the Renminbi (RMB), Guo said last year, owing to the downslide of the exchange rate of the US dollar in the international market, China depreciated the exchange rates of the RMB with the currencies of some of its main trade partners, which only narrowed the range of the appreciation of the RMB against these foreign currencies, but did not reverse the trend of the overall appreciation of the RMB. The exchange rate of the RMB with the US dollar has basically remained stable--a policy adopted by China since the outbreak of the Asian financial crisis. This, however, has not changed China's managed floating exchange rate system based on the supply and demand in the market. Practice proves that this exchange rate system suits China's current economic development stage, the bearing capacity of enterprises and the financial sector's supervision and regulation level, and conforms with China's national conditions. It is beneficial to China, Asia and the world at large. It also helps propel foreign trade, lower enterprises' costs of production, attract overseas investment, implement the central bank's monetary policy, and curb the trend of deflation. Guo stated that China would continue to implement the managed floating exchange rate system based on market supply and demand on the premise of maintaining the basic stability of the RMB exchange rate, timely improve the RMB exchange rate formation mechanism, and complete the foreign exchange market. In addition, efforts will be pooled to coordinate interest rate and exchange rate policies so as to promote the coordinated development of domestic and global economies.



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